MAY 2014 WATER
63
Technical Papers
operational responses, the effect of
endogenous factors (asset depreciation
and backlog in investment), and the
effect of exogenous factors (climate
change, population growth, etc).
Consideration of these factors requires
both diagnostic and prognostic capacity
(i.e. to understand the current capacity
to deliver service and predict future
capacity). As discussed above, shortfalls
in system capacity can be addressed by
both traditional and SUWM solutions.
The system is also subject to a 'soft'
opinion-based feedback loop from the
various stakeholder groups (customers,
regulators, suppliers, politicians,
academics, etc). This re ects the
perception of outputs and outcomes
delivered by the water sector,
including cost and value for money.
Such perceptions are in uenced
by complex issues related to vested
interests and values, and vary according
to the responsibilities and interests
of each stakeholder group. Groups
or individuals that consider the outputs
and outcomes delivered by the sector
to be misaligned with their expectations
can engage in advocacy for a change
in the level of investment, the way
investments are justi ed and/or the
type of infrastructure funded.
Experience shows this can provide
impetus for experimentation and
diversi cation that drives hybridisation,
but this is countered by concerns
about system effects, cost, certainty/
uncertainty and exposure to risk.
OPTION SELECTION
This latter point can be further
highlighted by considering how
investment options are identi ed
and considered. A key aspect in any
investment is the identi cation of feasible
solutions. In this context, 'feasible
solutions' imply infrastructure (or other)
options that are able to provide service
over an economic life. The 'option
space' is the sub-set of solutions that is
seriously considered for implementation.
Depending on the predominant factors
in uencing the decision, the option
space can be constrained to traditional
solutions or embrace the full set of
feasible solutions, including innovative
options associated with SUWM.
The various factors that in uence
the option space are shown in Figure 3.
Factors are grouped in terms of 'actors',
'technology' and 'drivers'. The individual
factors are dynamic and interact with
one another to create the option space
considered for a particular investment
or scheme.
It is noteworthy that these same
factors in uence stakeholder perception
of investment needs, as shown in Figure
2, which provides a coupling between
the two conceptual models.
The perspectives and attitudes of
the actors involved are key determinants
in how the option space is de ned. In
this context, actors are taken to be the
individuals or teams making the decision.
The options considered will re ect vested
interests, attitude to risk and normative
values within their organisation.
Importantly, stakeholders with different
values, interests and attitudes to risk will
assess, from their own perspective, both
the options considered and the solution
ultimately selected.
The issue of risk perception is critical to
understanding progress towards SUWM.
Decision makers are, by de nition,
responsible for selecting the solution
implemented, and thus are exposed
to risks associated with making a poor
choice. In contrast, while advocates for
innovation may have an informed view
of the technical and broader issues and
even a stake in the outcome, they are
not making the decision and will thus
have a different risk perception and
frame of reference (Lems et al., 2011).
This has signi cant implications
to commentary over the willingness
to innovate. For example, Farrelly
and Brown (2011) have stated that
the continued use of large-scale
technological solutions re ects a
'reticence' to go beyond pilot trials,
which is taken to be representative
of both the 'fear of failure' of actors
and inherent conservatism, especially
with respect to public health risks.
Noting that Figure 3 includes
performance and cost certainty as key
factors that in uence the option space,
an alternative view is that many innovative
solutions remain unproven and have low
community acceptance. Furthermore,
innovative solutions often have
requirements that are not necessarily clear
from the outset, and institutional capacity
therefore tends to develop over time (Bos
and Brown, 2012; Naylor et al., 2012).
Depending on the governance
arrangements, the staf ng, management
dif culties and skill requirements vary
considerably (Naylor et al., 2012).
Changes to any part the system can
also have both upstream and downstream
impacts that affect costs, performance
and future opportunities (Speers and
Mitchell, 2000). This leads to dynamic
changes across multiple temporal and
spatial scales that are often not intuitive,
even to experts. Lack of knowledge may
also mean that an attempt to achieve one
Figure 3. Factors in uencing the option space considered.
Note: A key aspect in any investment decision is to identify feasible solutions. Various factors
related to 'actors', 'technology' and 'drivers' in uence the option space considered. The factors are
dynamic and interact with one another. The perspectives and attitudes of the actors involved are key
determinants in how the option space is de ned.
ASSET MANAGEMENT